By Bill Alpert

Since the 1960s, the law has required investors to disclose their 5% stake in a company where they have takeover ambitions. Thousands of these filings arrive at the U.S. Securities and Exchange Commission each year.

Lawyers for Elon Musk say that this filing requirement, and the SEC itself, are unconstitutional.

They made the arguments in a memo filed Wednesday in the District of Columbia federal court, where the Tesla and SpaceX CEO is defending himself against SEC allegations that he filed a late stock ownership notice when accumulating shares of Twitter in early 2022. Musk eventually bought the social-media platform and renamed it X.

Barron's received no response to queries sent to Musk, through Tesla, and to his lawyers at Quinn Emanuel.

The agency says it has an open and shut case. It alleges Musk had acquired more than 5% of Twitter stock by March 14, 2022, so its Rule 13(d) required a filing by March 24. He didn't file until April 4.

"This case involves a straightforward, strict liability violation of important public reporting requirements under the federal securities laws," said an SEC motion this past August, when it asked the court to find Musk liable without any trial or fact-finding. It wants him to pay hundreds of millions of dollars in disgorged trading profits and penalties.

Wednesday, Musk replied that his late 13D filing in 2022 was a good- faith mistake by his money manager and his broker. They thought he had until the end of the year to file -- not 10 days, as Rule 13(d) then required -- and filed as soon as they realized their error, says Musk's legal memo.

Musk's lawyers then raise constitutional objections to the SEC's 5% disclosure rule. Investors with 5% of a stock must file within the short deadline of Rule 13(d) only if they seek control of a company. Passive investors have more time, under agency rules.

That distinction violates the First Amendment, say Musk's court filings, because it forces disclosure "based on the content of the investor's thoughts and intentions."

In fact, the whole agency is unconstitutional, Musk's lawyers add. The U.S. Supreme Court has let the president remove the heads of independent agencies like the Federal Trade Commission. That means the SEC's structure, under which its commissioners thought they could operate independently, violates the Constitution, say Musk's filings. Any cases brought under the SEC's old "insulated" regime must be dismissed, the filings say.

At the least, say Musk's Wednesday filings, he should be able to question the SEC about its three-year investigation before the court decides the case.

An SEC spokesperson declined to comment on Musk's constitutional arguments.

Write to Bill Alpert at william.alpert@barrons.com

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January 16, 2026 17:10 ET (22:10 GMT)

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